U.S. Military Policy and Anti-American Terrorism.Pdf

Negative Returns: U.S. Military Policy and Anti-American Terrorism* Eugen Dimant†, Tim Krieger‡ and Daniel Meierrieks§ Economics Working Paper 17106 HOOVER INSTITUTION 434 GALVEZ MALL STANFORD UNIVERSITY STANFORD, CA 94305-6010 September 2017 We investigate the effect of U.S. military aid and U.S. troop deployments on anti-American terrorism, using a sample of 106 countries between 1986 and 2011. We find that greater military commitment leads to more anti-American terrorism. We study the underlying mechanisms using a mediation analysis and show that both U.S. military aid and troop deployments in foreign countries do not improve local state capacity. Rather, we find that more military aid (but not troop deployments) is linked to poorer political-institutional outcomes in aid-receiving countries, explaining the positive association between U.S. military aid and anti-American terrorism. Our findings suggest that U.S. military policy does not make the United States safer from transnational terrorism. JEL Classification: D74; F35; F50 Keywords: U.S. military aid; U.S. troop deployments; anti-American terrorism; transnational terrorism; mediation analysis The Hoover Institution Economics Working Paper Series allows authors to distribute research for discussion and comment among other researchers. Working papers reflect the views of the authors and not the views of the Hoover Institution. * We benefited greatly from helpful suggestions and insightful discussions with Russell Berman, Guy Grossman, and Dan Hopkins. † Corresponding author. University of Pennsylvania. 249 S 36th Street, 19104 Philadelphia, USA. E-mail: [email protected]; and the Hoover Institution at Stanford University. ‡ University of Freiburg, Wilhelmsstraße 1b, 79098 Freiburg, Germany. E-mail: [email protected]; and CESifo, Munich. § University of Freiburg, Wilhelmsstraße 1b, 79098 Freiburg, Germany. E-mail: [email protected]. 1 1. Introduction In 2016 the U.S. spent approximately $6 billion on foreign military aid (U.S. Department of State, 2017). According to Vine (2015), the costs of operating American military bases overseas (outside warzones) amounted to $85 to $100 billion in the fiscal year 2014 alone. Besides the promotion of stability in aid-receiving countries, the safeguarding of U.S. homeland security from foreign terrorist threats is among the main goals of these military policy measures (The White House, 2013). Interestingly, however, the small number of empirical studies that have examined the determinants of transnational anti-American terrorism1 provide evidence that more military assistance by the United States is associated with more anti-American terrorism originating from the assistance-receiving country (Neumayer and Plümper, 2011; Gries et al., 2015; Krieger and Meierrieks, 2015; Saiya et al., 2017). This raises doubts as to whether the enormous resources used for U.S. military policy measures are well spent. The aforementioned studies, however, do not examine which underlying mechanisms can explain the nexus between U.S. military assistance and anti-American terrorism. We fill this research gap by empirically studying this link by means of a mediation analysis. A preview of our findings indicates that U.S. military assistance is unsuccessful in contributing to local state capacity building and thus unsuccessful in inhibiting anti-American terrorism. Rather, higher levels of U.S. military assistance (in the form of financial military aid) are associated with poorer political-institutional outcomes (e.g., more corruption, poorer human rights records) and more anti-American terrorism, suggesting that the U.S. is being punished in the form of anti- American terrorism for the—ostensible or actual—facilitation of local grievances. 1 Transnational terrorism means that more than one country is affected by a terrorist incident. For instance, the 9/11 attacks were transnational because foreign terrorists attacked on U.S. soil, with non-Americans being also victimized. 2 We proceed as follows. In Section 2 we discuss the theoretical mechanisms explaining how U.S. military policy may translate into anti-American terrorism. We introduce our methodology and data in Section 3. Section 4 presents our empirical findings. Section 5 concludes. 2. Transmission Channels Two potential mechanisms may explain the correlation between U.S. military policy and the genesis of anti-American terrorism, the state capacity channel and the grievances channel. State Capacity Channel. Anti-American terrorism may be the consequence of conflict between a local terrorist group and a U.S.-backed local government (Addison and Murshed, 2005). U.S. military sponsorship ought to increase the local government’s state capacity by, for example, freeing up government resources to improve the provision of public goods and appease the opposition (Addison and Murshed, 2005). Strengthening the aid-receiving government, however, also creates a strategic incentive for the opposing terrorist organization to attack the United States: Anti-American terrorism may lead the U.S. to withdraw its support for the local government (e.g., due to political pressure from the U.S. Congress or media), thus increasing the likelihood of terrorist success by weakening the opposing local government (Plümper and Neumayer, 2011). In other words, by strengthening the local government, the United States, paradoxically, may become a likelier target of transnational terrorism by violent domestic challengers of the government in place. Grievances Channel. Anti-American terrorism may also result from the—ostensible or actual—negative repercussions of U.S. military assistance in aid-receiving countries. As for actual repercussions, U.S. military assistance may contribute to poorer political-institutional outcomes in an aid-receiving country (as indicated by, e.g., corruption and human rights violations). For instance, Djankov et al. (2008) argue that foreign aid can be considered a 3 windfall gain (i.e., an unexpected increase in national income) that fuels rent-seeking behavior and corruption and reduces incentives for political-institutional reforms. When U.S. military assistance perpetuates or further erodes unfavorable political-institutional conditions in aid- receiving countries, this can consequently be expected to give rise to anti-Americanism. In addition to its actual consequences, the perception of military assistance by the local population in the aid-receiving country may also matter. For instance, Gries et al. (2015: 87) argue that by providing a repressive regime with aid, the United States “becomes associated with [...] local repression,” even though this aid most likely does not directly finance local authoritarianism.2 Generally speaking, U.S. support for an unpopular local government (plagued by, e.g., corruption and human rights violations) may mean that resentment is projected onto the United States and results in anti-American terrorism. For instance, in his 2002 “Letter to America” Osama bin Laden (2002) laments corruption, repression and economic mismanagement in the Islamic world but blames these factors on U.S. involvement, justifying Al-Qaeda’s anti- American terrorist activities. 3. Methodology and Data 3.1. Methodology To investigate the relationship between U.S. military policy and anti-American terrorism and the roles state capacity and local grievances may play in mediating this relationship, we follow the causal mediation framework described in, e.g., Imai et al. (2010, 2011). Consider the following set of regressions that include variables for anti-American terrorism (terror), U.S. 2 In fact, U.S. law (e.g., the 1997 Leahy amendment) explicitly curtails the provision of military assistance when human rights are violated. 4 military policy (uspolicy), factors mediating the relationship between the two (mediator) as well as a vector of confounding controls (X): 푇 terror푖푡 = ∝1 + 훽1푢푠푝표푙푖푐푦푗,푖푡 + 휁1 푋푖푡 + 휀푖푡1 (1) 푇 mediator푗,푖푡 = ∝2 + 훽2푢푠푝표푙푖푐푦푗,푖푡 + 휁2 푋푖푡 + 휀푖푡2 (2) 푇 terror푖푡 = ∝3 + 훽3푢푠푝표푙푖푐푦푗,푖푡 + 훾mediator푗,푖푡 + 휁3 푋푖푡 + 휀푖푡3 (3) Equation (1) examines whether measures of U.S. military policy affect anti-American terrorism. Due to the nature of the dependent variable (described below in more detail), we run a series of probit maximum-likelihood estimations to estimate the effect of U.S. military policy on anti-American terrorism. To ameliorate endogeneity concerns3 we also report findings from instrumental-variable probit estimations, where we use the ten-year lag of our military policy variables as our instrumental variables. While equation (1) mainly serves to corroborate previous research on the effects of U.S. military policy on anti-American terrorism, equations (2) and (3) are crucial to identifying mediation effects. Here, we first fit models for the mediator variable and the outcome. For parametric inference, we simulate model parameters from their sampling distribution and repeat the simulation of the potential values of the mediator and of the potential outcome given the simulated values of the mediator for an appropriate number of times (1,000 simulations). This allows us to compute the causal mediation effects, before computing summary statistics like point estimates and confidence intervals (Imai et al., 2010: 317). Importantly, this approach allows us to accommodate nonlinear relationships given that we consider a probit model, 3 For instance, endogeneity may be due to simultaneity, where U.S. military policy also responds

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